Court File and Parties

Citation: Silver v. Silver et al, 2017 ONSC 7749 Newmarket Court File No.: FC-11-37981-01 Date: 2017-12-29 Superior Court of Justice – Ontario – Family Court

Re: Esther S. Silver, Applicant And: Israel Silver, Respondent And: Zvi Aria “Hershy” Silver, Respondent (non-party) And: Canada Revenue Agency, Respondent (non-party) And: Director, Family Responsibility Office for the Benefit of Esther Silver, Respondent (non-party)

Before: The Honourable Mr. Justice R. Kaufman

Counsel: D. Cunningham, Counsel for the Applicant Israel Silver, Respondent, in person, not in attendance Zvi Aria “Hershy” Silver, Non-party in person (by conference call) F. Chaudary, Counsel for the Respondent Canada Revenue Agency A. Champsi, Counsel for the Respondent Director, Family Responsibility Office for the Benefit of Esther Silver

Heard: December 20, 2017

Ruling on Motions

[1] The applicant’s Motion at Volume 9, Tab 1 of the Continuing Record contains 13 requests for relief arising mainly from a default Judgment obtained by the non-party “Hershy” Silver as against his brother, the respondent Israel Silver (“support payor”) and how that default Judgment could impact on the distribution of the remaining funds retained in trust for the respondent Israel Silver from the proceeds of sale of the former matrimonial home.

[2] In its Motion found at Volume 9, Tab 4 of the Continuing Record, the Director of the Family Responsibility Office (“Director”) requests an order for a payment out of court in the sum of $99,183.29 for the benefit of the applicant, the support recipient. According to the Director’s Statement of Arrears, as of December 16, 2017, the support payor owes total support arrears of $107,538.65.

[3] At the conclusion of the oral argument, the court provided oral Reasons granting the relief sought by the Director subject to the priority of the liens registered by the Canada Revenue Agency (as hereinafter described) with written Reasons to follow.

Background

[4] The Application was issued on March 24, 2015 and the Answer on May 29, 2015. The matter proceeded in normal course with numerous requests for temporary relief. On February 24, 2016, Justice Douglas ordered the respondent support payor to remove all religious barriers to divorce within 21 days. In addition, the support payor was to fully bring himself into compliance with the child support Order within 60 days, in default of which his pleadings would be struck. He was also required to produce stipulated disclosure.

[5] On March 23, 2016, without notice to the applicant, the non-party issued a Statement of Claim against his brother on a personal loan allegedly owed by the respondent Israel Silver in the sum of $67,300 with respect to funds allegedly advanced three years earlier. On April 13, 2016 default Judgment was signed in the amount of $67,329.60 USD. The registration of the ensuing writ precluded the refinancing of the mortgage on the matrimonial home at an advantageous interest rate. On February 15, 2017, the non-party, without notice to the applicant, obtained an Order amending the default Judgment nunc pro tunc in the total sum of $86,165.77. The non-party resides in California and is an attorney practicing in the fields of litigation and family law.

[6] On April 16, 2016 Justice Douglas ordered the sale of the matrimonial home and dispensed with the support payor’s consent to the sale. That court also ordered 50% of the net proceeds of sale to be paid to the applicant and from the remaining 50%, support arrears, as accrued, and 50% of the carrying costs of the matrimonial home’s mortgage, realty taxes and insurance were to be paid to the applicant with the remaining funds to be held in trust by the applicant’s solicitors from which the ongoing child support would be paid.

[7] On May 16, 2016 the respondent’s pleadings were struck regarding financial issues only and the applicant was granted leave to proceed by way of an Uncontested Trial regarding financial issues only.

[8] The divorce Order was granted on June 10, 2016. In addition, the applicant was awarded $9,500 costs in relation to the prior Motions.

[9] The trial proceeded in the November 2016 trial sittings before Justice Wildman. Prior to the court rendering its decision including ruling on a Motion by the applicant for a vesting Order with respect to the matrimonial home, the Canada Revenue Agency (“CRA”) registered two liens against the matrimonial home in the total amount of $43,923.08 concerning income tax arrears and HST/GST arrears owed by the respondent for prior years. Allegedly, the respondent had threatened to late-file his returns to achieve this result. It is also noted that the respondent’s 2013 and 2014 Income Tax Returns were assessed on March 3, 2016.

[10] At trial, the respondent was ordered to pay:

(a) child support of $3,102 monthly commencing April 1, 2015;

(b) child support arrears fixed in the sum of $60,141 as of December 2, 2016;

(c) 60% of section 7 expenses;

(d) arrears of section 7 expenses fixed at $9,773.65 as of December 2, 2016;

(e) lump sum spousal support in the sum of $80,000;

(f) equalization of the sum of $11,393.39;

(g) carrying costs in the sum of $23,145.22 plus 50% of carrying costs between December 2, 2016 and the sale matrimonial home; and

(h) costs in the sum of $15,000 plus HST and any other costs orders in the proceeding.

[11] In addition to the above, title to the matrimonial home was vested in the applicant, funds sufficient to satisfy the Writ of Execution were to be held in trust, Motions relating to third-party creditors were severed with leave to bring said Motions with notice to said creditors and the respondent was barred from further proceedings without leave of the court.

[12] On February 20, 2017 the sale of the matrimonial home closed after the real estate solicitor representing the applicant facilitated the withdrawal of some of the registered encumbrances and provided undertakings to some creditors to hold agreed-upon amounts in trust so as to facilitate the withdrawal of the remaining encumbrances.

[13] The final Order of Justice Wildman allow the applicant, in her own discretion, to determine which debts would be discharged from the proceeds of sale and which debts would be enforced by the Director. As September 2, 2017 the applicant states that the respondent owes a total of $186,898.61.

Analysis

[14] Pursuant to section 2(3) of the Creditors’ Relief Act,[^1] a support or maintenance order has priority over other judgment debts, other than debts owing to the Crown in right of Canada regardless of when an enforcement process is issued or served. If the order requires periodic payments, the order has priority to the extent of all arrears owing under the order at the time of seizure or attachment. If the order requires the payment of a lump sum, the order has priority to the extent of any portion of the lump sum that has not been paid.

[15] In Taylor v. Taylor,[^2] the court held that the Creditors’ Relief Act was intended to protect support orders from the interests of other creditors by giving them priority over other judgment debts.

[16] It has also been held that even though a valid writ on behalf of the support recipient was not filed until after the sale of the home, the Creditors’ Relief Act clearly gave her support order priority over all other judgments, regardless of when her enforcement process was issued.[^3]

[17] In its argument, the Director acknowledges the exception to the priority of support under section 2(3) of the Creditors’ Relief Act is for debts owing to the Crown in right of Canada. As the CRA is enforcing a debt owed to the Crown in right of Canada, the Director acknowledges that it does not have priority over the CRA’s liens.

[18] In the course of oral argument, the court held the matter down to enable the Director to send its Factum, by email, to the non-party as he had indicated a lack of familiarity with the Ontario legislation relied upon by both the Director and the CRA. When the court reconvened, Mr. Silver (Hershy) conceded that if the court accepted the validity of the priorities reflected in the legislation, he would not pursue his argument. As it appeared that there may be under $5,000 remaining in trust, he indicated that he was also content that those funds remain in trust to be applied towards the child support that will become payable in the ensuing months.

[19] With respect to the relief sought by the applicant, the relief sought in subparagraphs (l) and (m) is granted and the final Order of Justice Wildman is amended to reflect the requested changes. Although the applicant conceded the priority of CRA’s lien with respect to HST/GST arrears, she challenged the priority regarding the lien for outstanding income tax. For reasons aforesaid, that relief, as claimed, is dismissed. Clearly, the Crown has priority over the applicant regarding these amounts.

[20] With respect to the relief sought by the applicant to set aside the default Judgment to which she is not a party or to stay enforcement, those claims are dismissed without prejudice to being renewed in the future, if warranted. The court is unable to impugn the credibility of Mr. Hershy Silver based on written submissions without having Mr. Silver present before the court while under cross-examination. To some extent, he is guilty by association with his brother who has undermined the primary objectives of the Family Law Rules by delaying matters, refusing to provide disclosure and taking steps to ensure that the Crown received funds to which his children might otherwise have been entitled to receive for their support. It is not a stretch to make a determination that he colluded with his brother to enable the brother to obtain a Judgment with the goal to divert further funds from his children. However, in view of this court’s earlier findings and the ongoing priority of future support claims, this court need not make a determination, at this time, as to the validity of the non-party’s Judgment.

[21] In accordance with the oral Reasons, the balance of the net proceeds of sale of the matrimonial home shall be paid to the CRA in an amount sufficient to discharge the indebtedness of the respondent Israel Silver under the liens previously registered and then, to the Director for the benefit of Esther Silver with credit being given to the respondent Israel Silver for any amounts attributable to the payment of support. Any remaining proceeds of sale shall remain held pending the accrual of future support and applied thereto until depleted.

Costs

[22] Neither the Director nor the Department are seeking costs. There will be no costs awarded against the non-party Hershy Silver. The applicant seeks costs as against Israel Silver in the sum of $16,000, alleging that he has acted in bad faith by seeking an adjournment in September, 2016 when this Motion was originally returnable and by not attending on the return date. The court notes that at paragraphs 168-169 of her Reasons for Decision, Justice Wildman refused to adjudicate upon the requests of the applicant to set aside the default Judgment and to render her Judgment on a nunc pro tunc basis so as to defeat the CRA liens. After a five day trial, the court awarded the applicant $15,000 plus HST, an amount requested by the applicant and an amount the court found to be a very modest request. The court also stated that if asked, she would have found that Mr. Israel Silver acted in bad faith by disobeying court Orders, failing to remove religious barriers to divorce, failing to properly provide disclosure and attending court late and, on some occasions, not at all.

[23] Although tempting, this court cannot ascribe the same behaviour to the respondent regarding the matters before this court, namely, the two Motions. It is noted that the respondent originally sought an adjournment of this pending Motion by 14B as the Motion was scheduled for September 20, 2017 and that evening was the onset of Rosh Hashanah. Justice Jarvis dismissed the 14B Motion, noting that the holiday commenced at sundown and that court commenced at 9:30 a.m. On September 20, the return of the Motion, Justice Bird has noted in her Endorsement that it was unrealistic to have set down a one hour Motion. Both Silver respondents sought leave to file material that day. It was permitted as the other parties had been served with the material several days beforehand. Although the court offered to hold the matter down until other Motions were completed, Mr. Israel Silver had to depart by 2:30 p.m. for religious reasons. The court adjourned the matter to December 20 but made temporary Orders, one of which was to allow the non-party to participate by teleconference and another one which, under Rule 1(8) prevented Mr. Israel Silver from participating in relation to the civil Judgment as a result of his ongoing non-compliance with the process and court Orders. It was open to him to participate if there was compliance with the prior court Order of Justice Douglas concerning the delivery of the Ghet but he evidently chose not to. The Endorsement of Justice Bird is silent as to costs and therefore, under Rule 24(10) this court cannot take the events of that day into consideration in the assessment of costs.

[24] The court also recognizes that the majority of the success is attributable to the Director and the Crown; any success achieved by the applicant was as the recipient of the Director’s success in achieving priority over the civil Judgment. The court has reviewed the applicant’s Offer to Settle dated June 21, 2017 which parallels her relief claimed in the Motion. In itself, it does not advance her claim for costs. However, the court must remain cognizant to the efforts of the respondent payor to frustrate the process and the entitlements of not only the applicant but their children. To that end, there was merit in the applicant’s request for further judicial assistance.

[25] Rule 24(8) states: “If a party has acted in bad faith, the court shall decide costs on a full recovery basis and shall order the party to pay them immediately.”

[26] In Scalia v. Scalia[^4] the Ontario Court of Appeal confirmed that the legal test for bad faith in the family law context as set out by Perkins J. in S. (C) v. S. (M)[^5],

a. In order to come within the meaning of bad faith in subrule 24(8), behaviour must be shown to be carried out with intent to inflict financial or emotional harm on the other party or other persons affected by the behaviour, to conceal information relevant to the issues or to deceive the other party or the court.

b. A misguided but genuine intent to achieve the ostensible goal of the activity, without proof of intent to inflict harm, to conceal relevant information or to deceive, saves the activity from being found to be in bad faith.

c. The requisite intent to harm, conceal or deceive does not have to be the person’s sole or primary intent, but rather only a significant part of the person’s intent.

d. At some point, a party could be found to be acting in bad faith when their litigation conduct has run the costs up so high that they must be taken to know their behaviour is causing the other party major financial harm without justification.

e. In short, the essential components are intention to inflict harm or deceive.

[27] The court can determine that there shall be full indemnity for only the piece of the litigation where bad faith was demonstrated.[^6]

[28] Bad faith is not an “all or nothing” determination. A party may have acted in bad faith at specific times or in relation to specific aspects of the litigation. The court has the discretion and responsibility to distinguish which aspects of a party’s behaviour may justify heightened costs consequences. Individual instances of bad faith may be relevant to the overall consideration of a party’s conduct under Rule 24(11). Some bad faith does not justify full recovery on all issues. Reasonableness and fairness still apply.[^7]

[29] The Ontario Court of Appeal[^8] confirmed that modern costs rules are designed to foster three fundamental purposes, namely to partially indemnify successful litigants for the cost of litigation, to encourage settlement and to discourage and sanction inappropriate behaviour by litigants bearing in mind that the awards should reflect what the court views is a fair and reasonable amount that should be paid by the unsuccessful party.

[30] One of the considerations in an assessment of costs is to fix costs in an amount that is “fair and reasonable” for the unsuccessful party to pay in a particular proceeding.[^9] It is evident that the more egregious behaviour of the respondent payor occurred in the prior proceedings as evidenced by the court’s Reasons. However, this court cannot take into consideration what has already been taken into consideration by the trial Judge and the numerous Judges involved in the various steps leading up to trial. Much of what the applicant complains about to this court is conduct already adjudicated upon.

[31] Having said that, the court must still consider the factors set out in Rule 24 (11). The issues before this court were of utmost importance to the financial survival of the applicant and her children. The Affidavit material relied upon by the respondent and his brother focused on the alleged behaviour of the applicant that contributed to the breakdown of the marriage (from their perspectives) including allegations of manipulations to lay blame on the respondent. Unfortunately, the Affidavits are attempts to justify the litigation behaviour of the respondent which has been well-documented. His attempts were unsuccessful. Even in the absence of a bad faith finding regarding the Motions before this court, the respondent’s behaviour has been most unreasonable as evidenced by his ongoing refusal to remove religious barriers to remarriage. The lawyer’s rates are reasonable but excessive time has been expended by the applicant in light of the legislative provisions that should have served as an accurate prediction of the outcome of these Motions.

[32] Taking all of the above into consideration, the applicant shall be awarded costs against the respondent Israel Silver in the amount of $9,000 plus HST for an all-inclusive total of $10,170 payable forthwith. There shall be an Order that all of the costs Order shall be enforced by the Director of the Family Responsibility Office pursuant to section 1 (1) (g) of the Family Law Responsibility and Support Arrears Enforcement Act, 1996 as all of the expended time was incurred in relation to the recovery of support and incidents thereof.

Justice R. Kaufman

Date: December 29, 2017

[^1]: Creditors’ Relief Act, 2010, S.O. 2010, c.16, Sched. 4, s.2(3) [^2]: 2002 44981 (ON CA), [2002] OJ No 2313 (OCA) per Abella, JA (as she then was) [^3]: Herman v. Rathbone, 2000 22321 (ON SC), [2000] O.J. No. 318 per Beckett, J. [^4]: 2015 ONCA 492 (Ont. C.A.) [^5]: 2007 20279, [2007 OJ No. 2164 (Ont. S.C.J.). [^6]: Stewart v. McKeown, 2012 ONCJ 644 (Ont. C.J.) [^7]: X v. Y, 2016 ONSC 5551 (Ont. S.C.J.); Benzeroual v. Issa and Farag, 2017 ONSC 6225 [^8]: Serra v. Serra, 2009 ONCA 395, [2009] O.J. 1905 (ONCA) [^9]: Farjad-Tehrani v. Karimpour 2009 CarswellOnt 2186 (S.C.J.) at para. 32, aff’d 2010 ONCA 326, 2010 O.N.C.A. 326 at para. 4.